Should anyone care that an ex-offender starts a business upon release?

The answer should be an emphatic yes. Here’s why.

After Cameron Hayes* served eight years in prison for drug dealing, he knew that finding legitimate employment on the outside would be close to impossible. Having a criminal record is like a scarlet letter in the job market. So instead of looking for a job, Hayes decided to create one. “I wanted to do something where I wouldn’t be judged by my past, but by who I am now,” said Hayes. In 2008, as the U.S. economy was sliding into the worst recession since the 1930s, he started his own moving company called Moved by Grace.

Today, Hayes owns a small fleet of trucks. His business generates $200,000 in annual revenue. He has two full-time employees and hires others part time as needed.

When Jeremy Oliver* got locked up for a second time with a three-year burglary sentence, he vowed to never return behind bars. Before his drug and alcohol problems landed him in prison, he worked at a graphic arts house, but he’d never owned his own firm. In 2009, a year after his release, he launched Sunrise Printing. At first, business was slow, but Oliver persevered; he delivered every printing job personally, sometimes adding a handwritten thank-you note. “I wanted to wow my customers,” Oliver said. “I’d promise to have a job done in three days, and I’d try to have it ready in two.” Gradually, he built a loyal client base.

In 2011, Sunrise Printing generated $283,000 in revenue and was making a 10% profit. In 2013 the company had three full-time employees and was on pace to break $600,000 in revenue.

How did they do it?

Photo Credit: Prison Entrepreneurship Program (PEP)

Like roughly 800 other former inmates in Texas, Hayes and Oliver are graduates of the Prison Entrepreneurship Program (PEP). Founded in 2004, PEP is a Houston nonprofit that runs an entrepreneurship boot camp and re-entry programs for inmates in more than 60 Texas prisons. That’s where Hayes and Oliver learned what it takes to start and run a successful small business. “Their main assignment was to write a business plan and defend it many times before panels of executives, whom we recruit,” said Bert Smith, PEP’s CEO.

Turning inmates into entrepreneurs may not be such a radical idea. Many prisoners, especially those involved in the drug trade, are successful entrepreneurs. “I’ve always had entrepreneurial skills,” Hayes said. “I just used them in bad ways. I knew all about profit margins and managing people.”

Steady employment is a crucial factor for preventing recidivism, but for ex-offenders finding a job is a big challenge. Economist Harry J. Holzer at the Georgetown Public Policy Institute estimated that two-thirds of employers would not hire an applicant with a criminal record.

Faced with few options, ex-cons end up committing crimes that send them back behind bars. “There’s a high correlation between unemployment and recidivism,” said PEP’s Smith. “More than 80% of the guys who are arrested for a second or third time are unemployed at the time of their arrest.”

As PEP’s chief development officer, Jeremy Gregg, said, “We have identified at least 125 businesses owned by our graduates. Of these, at least two are now generating over $1 million in revenue.”

Photo credit: Prison Entrepreneurship Program (PEP)

Although not all PEP grads become business owners, they are highly employable: within 90 days of release, every single one of them has a job. While more than 40% of ex-offenders in the U.S. return to prison within three years of release, the recidivism rate for PEP grads hovers below 5%.

In addition to saving taxpayers millions of dollars in the cost of re-incarceration, programs like PEP give ex-offenders a real shot at making something of their lives. As Hayes put it, “You know, the energy that I used to do illegal things—the program helped me channel it towards doing something good.”

*The names of the former inmates and their companies have been changed to protect their privacy.